Discovering technology stocks that offer superior performance at a fair value can be a challenging task in today’s market, where many stocks in the sector can be defined as costly or overly expensive. However, Meta Platforms and PayPal break this trend, offering some intriguing opportunities for investment. Their valuations differ, with Meta Platforms being approximate to the S&P 500’s forward price-to-earnings ratio, while PayPal trades at a lower ratio, making it relatively cheaper.
Starting with Meta Platforms, this company exemplifies the characteristics that define top-performing tech firms. It has continuously shown the capacity to evolve and stay ahead of the technological curve. Originating as a social media entity, the company has ventured into new frontiers such as virtual reality (VR), augmented reality (AR), the evolving landscape of the metaverse, and the development of artificial intelligence (AI) technology.
Not all of Meta Platforms’ exploratory initiatives have generated stellar results. The company’s Reality Labs, which focuses on VR, AR, and the metaverse, has reported losses amounting to around $60 billion over the previous five years. Having said that, it’s premature to dismiss this division offhand. Last year, its Ray-Ban Meta glasses recorded sales exceeding 1 million units and have incorporated AI features.
However, they haven’t achieved the desired success yet. Alternatively, the utilization of AI for content recommendations has begun to yield hopeful results for Meta Platforms. This strategy is increasing user engagement across its social platforms, with AI-integration in ad tools assisting advertisers in realizing greater return on their spending, thereby prompting additional investments.
Encouragingly, Meta’s Q1 result declaration showcased a 5% year-on-year increase in ad impressions and a heightened 10% average price per ad. Concurrently, the company’s total revenue and adjusted earnings per share for the quarter surged by 16% and 37% respectively, outperforming expectations. Furthermore, these results denote continued growth in Meta’s key performance indicators.
Despite this success, Meta Platforms’ significant dependency on advertising revenue, contributes to around 98% of the company’s total revenue, is a valid concern. In an economic downturn where companies minimize their marketing budgets, Meta Platforms could potentially be hit hard. Yet, the company has a strong financial profile with $70.2 billion in cash, cash equivalents, and marketable securities as of the end of Q1, which should help tide over any short-term hurdles.
In the past three years, Meta’s stock value has amplified by 238%, almost quintupling the S&P 500’s returns. While the rate of growth may decelerate going forward, the company’s extensive user base and AI-focused investments should support its sustained market outperformance.
Unlike Meta, PayPal’s stock trajectory hasn’t been as buoyant, depreciating by 4.3% over the past three years. Additionally, the company has to grapple with increasing competition from other digital payment providers. However, under new leadership, there’s renewed optimism for PayPal’s future growth.
In September 2023, Alex Chriss took on the role of CEO at PayPal. Before this, Chriss led the growth of the Small Business and Self-Employed Group at Intuit, establishing a record of driving customer growth and revenue expansion. His recent stewardship at PayPal has been received positively as he has revamped the management team and orchestrated crucial e-commerce partnerships, even securing a checkout deal with e-commerce behemoth Amazon.
Signaling a shift into new realms, PayPal announced a comprehensive merchant platform named PayPal Open earlier this year, amalgamating all its services under a singular platform. Moreover, it’s making headway into the digital advertising sphere with the introduction of PayPal Ads. Given PayPal’s massive user base of 400 million and Venmo’s 92 million users, advertising represents a vast potential revenue stream.
The core business of PayPal remains robust, with $1.5 trillion in annual payment volume demonstrating its enduring value. In its Q1 2025 results, PayPal marked its fifth consecutive quarter of profit growth, recording a 31% increase in operating income.
Also, PayPal’s balance sheet looks sturdy, with $15.8 billion in cash, cash equivalents, and investments as of the end of Q1, set against a debt of $12.6 billion. Given its current stock valuation and with the promising launch of ads, PayPal appears to be an attractive value pick for long-term investors.